Describe the two most significant risks

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Reference no: EM133560677

Case: Healthcare America is weighing the purchase of a new $3M MRI facility to serve its expanding presence in orthopedic medicine. The machine is expected to be nearly fully utilized in the next five years. The government recently exempted taxes on profits from new investments to encourage capital investments. The equipment is expected to have ten years of useful life with no salvage value. The company employs straight-line depreciation. Net cash inflows of $800,000 are expected each year for five years. The company uses a rate of 9% in evaluating its capital investment projects.

Instructions

Create a professional PowerPoint presentation (with detailed speaker's notes) that fully supports your recommendation of whether or not this capital expenditure is justified from a cost accounting perspective.

Include the following in the presentation:

Explain your overall approach to evaluating the capital purchase.
What criteria are most important?
What questions do you need answered?
Justify your choice of three capital investment measures that best support a responsible recommendation.
Perform the calculations for each of your chosen measures. (Note: If you need more data for your preferred methods, state your assumptions or reasonably determined data values.)
Recommend your choice on whether or not to make this investment with support from your calculations and the other considerations stated in your overall approach.

Describe the two most significant risks associated with your recommendation from a cost accounting perspective.

Reference no: EM133560677

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